Within four years, Nashik-based KBC Multi Trade was able to collect crores of rupees. Its promoters and directors are absconding and three agents are already dead. The question is, why nobody, including SEBI took action in time?
Even as several network marketing companies or multi-level marketing (MLM) companies are trying very hard to lobby with the union government, to legalise their 'direct selling' module, here comes a story of the tragic end of an agent of one such company. As it happens with almost all MLM or money circulations schemes, in the case of Nashik-based KBC Multi Trade Pvt Ltd, the promoters have vanished with the loot estimated to be about Rs2,000 crore. Also, as usual, despite registering a complaint and subsequent raids on KBC Multi Trade offices, the Police could not make any further progress. Even market regulator Securities and Exchange Board of India (SEBI), which is supposed to be regulating collective investment scheme (CIS) has so far not shown any interest in KBC Multi Trade's fund mobilisation. KBC Multi Trade's scheme was, if you invest Rs1 lakh today, the company would pay you Rs1 lakh in six months, Rs1 lakh in the next 18 months, and another Rs1 lakh after 30 months. Thus giving three-times return on investment in 30 months.
According to local media reports, Pushpalata Popatrao Nikam and her son Sagar committed suicide due to mounting pressure from people seeking refund of their money invested in KBC Multi Trade. The mother-son duo had invested their own money in the MLM too, while Sagar was also working as agent for KBC Multi Trade and collected huge amounts from people. Balaji Gujjewar, another agent of KBC from Hingoli in Marathwada region, died due to a heart attack. Gujjewar too, had collected crores of rupees in and around Hingoli for investing in KBC Multi Trade and was under severe pressure from these investors.
Earlier in March, Nashik Police conducted raids on the offices of KBC Multi Trade and seized Rs4.66 crore, along with some computers and documents. They also arrested one Babu Chavan, but he was granted bail by a city court on the same day.
According to reports, the main promoters of KBC Multi Trade are Bhausaheb Chavan and his wife Aarti. Bhausaheb was reportedly working in a local bank and hence, had knowledge about the financial status of several of the bank's customers. In 2010, he floated KBC Multi Trade and promised to make his investors 'crorepatis' within few months if they invest lakhs of rupees. He also promised 20% to 30% commission to 'agents' who would lure more people into the 'get-rich-quick' scheme.
On Monday, several investors staged a rasta roko at Adgaon, near Nashik, demanding immediate arrest of the company's promoters and directors. After the rasta roko, the Police arrested Bapusaheb Chavan, managers, Pankaj and Nitin Shinde, both agents of KBC Multi Trade, as well as a driver of KBC's main promoter-Bhausaheb Chavan.
On 25 February 2013, the Economic Offences Wing (EOW) of Nashik Police even issued a public note, warning people about KBC Multi Trade. Following the raids and arrest of one person by Nashik Police in March this year, the EOW of Aurangabad Police also asked people to file complaints against KBC Multi Trade. The MLM company was active in several districts in Maharashtra, including Aurangabad.
However, besides issuing a public notice, the Police kept mum on the MLM. This probably helped the promoters of KBC Multi Trade to collect as much money as they could and vanish overnight. According to unconfirmed reports, Bhausaheb may have fled to Singapore along with his family.
There are thousands of people who are coming forward to lodge complaints against KBC Multi Trade and its promoters. While the exact number of people and the money they invested cannot be ascertained, it is estimated to be hundreds of crores.
Karan Gaikar, president of Chhava Sangathana, that organised the rasta roko, has demanded an inquiry by the Central Bureau of Investigation (CBI) in this money circulation fraud. “People were asked to invest in bands of Rs7,200, Rs17,200, Rs57,200 and Rs86,000; assuring a three-times return in less than three years," Gaikar was quoted as saying in a news report.
Bapurao Mate, a resident of Adgaon area, told the Times of India that he had invested Rs2.63 lakh with the hope that he would get an assured amount of Rs11.63 lakh in two to four years for his daughter's wedding. “I am from Marathwada and at least 300 people from the region have invested money with the company on my assurance," he told the newspaper.
Japan can play an important role in developing India’s infrastructure and in bringing India’s manufacturing sector into Asia’s cross-country supply chain, while India offers low costs, burgeoning markets and soon, the world’s largest population, says Nomura
There is a growing symbiotic relationship between India and Japan as both countries share large comparative advantages and are embarking upon significant market-opening reforms under Abenomics and Modinomics. "Japan, being a wealthy net creditor nation can be an important investor in India's much-needed infrastructure. Japan, by outsourcing production, can also play an instrumental role in bringing India into Asia's elaborate cross -country manufacturing supply chain, as it has done for so many other Asian countries over the decades," says Nomura in a research report.
Nomura said it believes that landslide victory by Prime Minister Narendra Modi, combined with Governor Raghuram Rajan at the helm of Reserve Bank of India (RBI), is a potential game changer for India, the world’s third-largest economy in terms of purchasing power parity. It says, "The current landscape offers the best opportunity India has had in decades to implement bold economic reforms and to put the inflation genie back in the lamp. India has so much untapped growth potential: from a young population and a budding middle class, to how much easier business would become if investment bottlenecks can be unclogged. It is not an exaggeration to say that India is set to be Asia's biggest turnaround story. We expect GDP growth to rise to about 6.5% in 2015 and to over 7% in 2016, marking a watershed year when India's economy likely starts to outpace that of China. Growth in India is largely domestic driven, which offers a huge pool of opportunity for investors."
About 1,000 Japanese companies operate in India – some have for many decades – and some brands command immense respect for being synonymous with high quality – for example, Honda and Suzuki in automobiles; Sony and Panasonic in electronic goods; Cannon, Ricoh and Nikon in optical instruments; Hitachi and Mitsubishi in capital goods.
Talking about India, the research note says, the RBI's inflation fight will go hand in hand with the proactive, business orientated Modi government’s strong mandate to cut red tape and jump-start supply-side reforms. "In our base case, we expect reforms to revitalise real investment growth to 10% per annum (pa), lifting potential output growth to around 7% in the next five years; if reforms are fast tracked, real investment could hit 15% pa, raising potential growth to above 8%. It is not an exaggeration to expect India to stand out as the biggest EM turnaround story in the next five years," Nomura said.
Japan and India signed a Comprehensive Economic Partnership Agreement (CEPA) which went into force in 2011, and to illuminate the potential, India’s accounts for only 1.2% of Japan’s total foreign direct investment (FDI) and 1.0% of Japan’s total trade.
The overseas production ratio for Japanese manufacturers was 20.6% in FY12, much higher than FY11’s 17.2%, but the FY18 forecast for the ratio is 25.5% –which would be the highest on record. Surveys of Japanese MNCs show that China is losing its attractiveness as an investment destination due to its rising labour costs, whereas India has moved up the rankings to now be Japan’s most attractive destination over the next decade, Nomura said.
Perhaps serendipitously, much of what India needs, Japan can offer. Engineering and construction companies can help with massive infrastructure projects such as the Delhi-Mumbai Industrial Corridor – the poster project of its sort. High-speed railway networks, roads, power generation and renewable energy are all areas where Japan can offer its cutting-edge technological know-how and expertise. Japan can bring India into Asia’s vertical manufacturing supply chain, as it has done for so many other Asian countries. As it happens, infrastructure-system exports are a key plank of Abenomics, looking to target 30 trillion yen of infrastructure-system orders in 2020 (a tripling from 10 trillion yen today).
A recent Nomura survey of Japanese institutional investors revealed that they too have a positive outlook on India’s financial markets, ranking India No1 among key EMs for investment potential. India offers opportunities for Japan to diversify its enormous financial assets (both public and private); Japanese households are have 1,630 trillion yen of funds, with just over half held in investable cash holdings and deposits, Nomura added.
Talking about India equities, Nomura said, despite its strong 25% gain over the past four months, it expect the Sensex to continue to outperform Asia ex-Japan and Global indexes in the quarters ahead. "We remain Overweight India in both contexts. Over the next five years, we expect the market to provide about 15% CAGR, driven initially by multiple expansion and then by earnings growth as economic growth picks up. Sector-wise, conditions favour those leveraged to a secular rebound in growth, such as financials, industrials and infrastructure," it added.
According to AMFI data 329 distributors earned Rs2,572 crore as commission from selling mutual fund schemes. Citibank leads the chart with Rs181.16 crore, while SBI earned just Rs29 crore as commission
Income earned by distributors from selling mutual fund (MF) schemes surged 9% to a staggering Rs2,572 crore in 2013-14, driven by improved market conditions, even as their number fell during the year.
According to latest data available with Association of Mutual Funds in India (AMFI), the total income earned by 329 distributors stood at Rs2,572 crore. Citibank topped the chart with highest commissions.
This was 9% higher than the total commission of Rs2,367 crore given by the fund houses to their 332 distributors during the fiscal year 2012-13.
Public sector banks, meanwhile, are far behind their private peers when it comes to selling MF products.
Interestingly, the top 10 distributors contributed about 47% of the overall commissioned earned in the past financial year. There were seven banks among the top-ten mutual fund distributors.
Market participants attributed the spike in commission to better capital market conditions in the past fiscal coupled with measures taken by SEBI for the benefit of the sector.
However, the year ahead is going to be tricky for the MF industry as the recent budget proposals may dealt a big blow to the sector, mainly on debt and gold oriented funds.
The Union Budget 2014-15 increased long-term capital gains tax on debt funds to 20% from 10%, and changed the definition of long-term for debt funds to 36 months from 12 months.
As per the latest disclosure of commission and expenses paid by various fund houses to their distributors, Citibank led the list earning a commission of Rs181.16 crore followed by HDFC Bank (Rs158.51 crore), NJ IndiaInvest (Rs149 crore) IIFL Wealth Management (Rs130 crore) and SPA Capital Services (Rs121 crore).
Besides, other among the top-ten commission earners - ICICI Bank (Rs118 crore), Kotak Mahindra Bank (Rs99 crore), Axis Bank (Rs94 crore), Standard Chartered Bank (Rs89 crore)and HSBC Bank (Rs83 crore).
As per AMFI data, State Bank of India (SBI), the largest lender, could manage to get a commission payment of Rs29 crore, followed by IDBI Bank (Rs9 crore), Union Bank of India (Rs6 crore), Canara Bank (Rs5 crore) and Bank of Baroda (Rs4 crore.)
AMFI discloses commissions of those MF distributors who meet any of the four criteria -- presence in at least 20 locations or manage assets of at least Rs100 crore, or should have received commissions worth a minimum of Rs1 crore from all MFs collectively, or received above Rs50 lakh from one fund house.